Abstract
We study the transmission of bank distress to nonfinancial firms from 34 countries during the 2007-2009 financial crisis using systemic and bank-specific shocks. We find that bank distress is associated with equity valuation losses and investment cuts to borrower firms with the strongest lending relationships with banks. The losses are not offset by borrowers' access to public debt markets and are concentrated in firms with the greatest information asymmetry problems and weakest financial positions. Our findings suggest that public debt markets do not mitigate the effects of relationship bank distress during financial crises.
| Original language | English |
|---|---|
| Pages (from-to) | 1165-1197 |
| Number of pages | 33 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 50 |
| Issue number | 6 |
| DOIs | |
| Publication status | Published - Dec 2015 |
Keywords
- credit conditions
- great-depression
- external finance
- liquidity
- intermediation
- investment
- reputation
- borrowers
- choice
- shocks